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Friday, March 26, 2010

Does Canada have death taxes or inheritance taxes?

Readers please note: Due to the number of comments added to this thread, the site won't let me read all of the questions. 200 comments seems to be the limit. I would like to see your comments and questions though, so please feel free to add them to any thread on this blog - lynne.

No, Canada does not have a specific tax that is levied against beneficiaries inheriting under an estate.

So if there is no death tax, why is there so much talk about planning ahead to pay for taxes in an estate?

There are plenty of tax consequences when a person passes away, even if there is no specific tax on dying. This is because a person's assets are deemed by law to have been disposed of by the deceased one minute before he or she died.

For example, everyone who owns an RRSP knows that we do not pay tax on the money we put into our RRSPs until we take it back out. In other words, the money is not tax-free, it is tax-deferred. Every time we take out a portion of the funds, we pay the tax on that portion. So if you were to dispose of your entire estate one minute before you died, and as part of that you took all of the money out of your RRSP (or RRIF), then you would have to pay the taxes on it.

In practice, your estate would pay those taxes, even though the person named as the beneficiary of your RRSP or RRIF is not your estate. You can avoid paying those taxes if the beneficiary you designate is your spouse or a disabled child.

Another tax liability that arises when a person passes away is capital gains tax. This is a tax on capital property (some examples of which are real estate and shares in private corporations) that has increased in value since the day you acquired it.

For example, if you bought a cabin at the lake for $50,000 years ago, and by the time you die the cabin is worth $90,000, then the value of your property has gained $40,000. Half of that gain is taxable. Your executor would then have to include $20,000 (half of the gain) on your last tax return as income.

This tax is also payable out of your estate.

There is an exception to this rule as well. Your estate does not have to pay any capital gains tax on your residence. This is referred to as a capital gains exemption. If you have a home and a cabin, or a home and a rental property, you can claim the exemption only on one property, that being your usual place of residence.

There are some tools that can be used to address tax liability, such as life insurance policies, beneficiary designations, trusts and restructuring of the ownership of assets, depending on your situation.

For this reason, it's worthwhile to sit down with an experienced estate planning lawyer to make sure that you're aware of all of the possible tax consequences of your death and that of your spouse.,You also want to make sure you're aware of ways to reduce taxes and to have cash flow to pay the portion that can't be reduced.

226 comments:

I respectfully disagree with the accuracy of the statement that, in Canada, there is no "specific tax that is levied against the estate of a person who dies". Ontario, for instance levies the Estate Administration Tax (EAT).

Ontario EATs away with its tax on the estate of the deceased as follows:-one half percent of the value of the estate above $1,000 and up to $50,000-one and a half percent of the value of the estate above $50,000

Further reference on the EAT Act 1998: http://www.search.e-laws.gov.on.ca/en/isysquery/77a53d6d-315f-46cb-af2e-7e141490650d/1/doc/?search=browseStatutes&context=#hit1

Hi, thanks for your comment. You're right that this statute exists. However, I would have referred to this as a probate fee, as it is charged against the estate at the time the letters probate (called estate certificate in Ontario) is issued. On this blog I always refer to the cost of getting a probate as a probate "fee". I feel that calling it a tax might make readers think there is a probate fee AND a probate tax. Hope that helps clear up any questions.

Hi Lynn, I have a question on estate tax. My parents are Canadian residents. If they pass away, does their primary residence(the estate) in Toronto owe any tax? I guess is not, right?! But If they have a will to pass the house to me, do I need to pay any tax? I am a US resident.

The Americans pay an inheritance tax and Canada does not. Have politicians in Ottawa talked about a tax on estates in the form of an inheritance tax? Would it be something they might consider in the future (given income disparities getting wider and new studies from the likes of Richard Wilkinson et al. suggesting it is the source of social ills)?

It wouldn't surprise me if the Canadian government imposed an estate tax or inheritance tax at some time in the future, although I do not know of any specific dialogue about this at present. In my opinion it isn't going to happen while there is a minority government in office. Also, I think the imposition of an inheritance tax might be seen as sending a message that is inconsistent with creating the TFSA and the RDSP a couple of years ago.

My parent is a non-resident of Canada, living in Hong Kong. They have assets in stocks and bonds; a principle home and some shares in a private Canadian company. There's no estate tax in Hong Kong. Do I have to pay any Canadian tax when I inherit the assets from them?

Hi. I couldn't possibly give tax advice on a specific situation without the complete details, so you'd have to consult a lawyer or accountant in your area. What I can do, however, is give you some general information about estate taxation.

The general rule of estate taxation is that when an asset is being transferred, the tax goes against the estate selling/giving, and not the person receiving.

For example, you mentioned shares in a private Canadian company. Those are capital property. So if they increased in value during the time your parents owned them, there will be capital gains tax owing. But you don't owe that; the estate does.

Also, the money held in stocks and bonds might be registered, which means it is held in something like an RRSP or RRIF. If so, when your parents pass away the registered funds will transfer to their estates, at which time the tax must be paid on it. That too comes out of the estate and not your pocket or anyone else's pocket.

When "the estate" pays taxes, it doesn't come out of a beneficiary's pocket. But taxes and all expenses are paid before beneficiaries are, so paying tax out of an estate means there is less left in the estate for anyone to inherit.

Keep in mind that if there is a lot of tax owing for some reason, assets may have to be sold or cashed in to pay the tax. Again, this doesn't mean that a beneficiary has to come up with the money, but it means the beneficiary inherits less money.

Also, I have absolutely no way of knowing whether Hong Kong would impose any tax on assets leaving the country to a beneficiary. I assume there is a probate fee to be paid in Hong Kong as well.

I strongly urge you to talk to an accountant if you need a specific answer, because certain facts can change the general rules I've set out here.

I'm a long time client of the BNS, and a non resident Canadian citizen, just joining your blog readership. I live in a country with a tax treaty with Canada (I would guess that Honk Kong does too).As a non resident - I have no tax obligation in Canada on capital gains from investments in Canada and a reduced withholding tax on RRIF withdrawal, interest and dividends. And no obligations at all on property held in other jurisdictions. I presume these rules would still apply when I die: so why do you say that there would be capital gains payable on investments? (excluding real property.)

I agree with your comment that estate taxes are likely in the future. In the past with defined benefits, the plans only needed to fund to the average lifespan. These days, with defined contributions and the focus on individualistic planning, we need to fund as if we will live to 95. We should see a massive growth in estates. At the same time, the government will need funds to stem the upcoming pension/healthcare crisis.

Hi,If the owner of a house dies and his house is his principal residence, there is no tax on the transaction from the deceased to the children. This is the same whether there is a will or not and it's the same in all provinces because this is a federal tax issue.

If owner of a house dies and his house is his principal residence, and upon death, the house is passed to his grown children. If the children then subsequently decide to sell the house, will they need to pay taxes on the capital gains of the house? (Assuming they already have houses of their own so that house will not be their principal residence.) Is there an allowable period of time for sale of the house to avoid paying taxes on the gain?

Hi,If the children later sell the house and it is not their principal residence, yes they will have to pay tax on the gain, as you have described. No, there is no allowable period for sale to avoid paying capital gains tax.

Beneficiaries of life insurance policies do not have to declare them as income in Canada. However, there may or may not be tax on the policy in the US, and as I don't practice down there, I couldn't tell you what it is.

Hi. Most estates are wrapped up within a year. If you are waiting for a Tax Clearance Certificate from Canada Revenue Agency, you can expect to wait 6 to 9 months for that. Yep, that's pretty long, but there doesn't seem to be a way to speed up that part.

Hello from AB, I have read that the estate is responsible for all debts and taxes. My question is, there was allot of taxes and debts paid and to be paid on the estate because of the estates nature. Probate hasn't even been started and monies was borrowed against a business which is part of the estate from what I understand. Even though this may possibly be the wrong course, If all party's involve in the will are ok with this; do you see any problems with this situation in any way?

You're on the right track when you suggest that if all parties agree with a certain course of action, it's ok. But this idea has its limitations. In my experience, everyone says they're ok with it, but nobody thinks it through and certainly nobody writes it down and signs it. An agreement like that can be fine until something happens that pushes it, and then everyone finds out they don't have a legal leg to stand on.

You haven't said who has borrowed the money. If it's the executor, that to me is a big problem. An executor is not entitled to profit personally from being the executor. And regardless of who it was, what if the person doesn't pay it back? How will the rest of you collect it back?

If the person who borrowed the money is a beneficiary, the executor might decide that the person's loan from the estate is their inheritance and the other beneficiaries inherit the business. What if the business fails because the loan isn't repaid? Would the other people sue the one who didn't repay it?

There is also the issue that no beneficiaries are supposed to receive an inheritance until all expenses and debts are paid. From what you've told me I already know that probate fees haven't been paid, nor have taxes. Has anyone thought about how the capital gains tax on the business are to be paid?

You mention that houses passing to children are not taxable. What about houses which pass to a niece and nephew? Is there any difference. I am referring to adults when I say niece and nephew.Both have their own principal residences and would probably rent or sell the houses in question.There are 2 houses in question. One is the decedents principal residence and 1 is a rental property.Appreciate your help.

Hi Harry,The rules are the same when the house passes to a niece or nephew. The key to the transaction is not who is getting the house, but whether the house being transferred is the principal residence of the person who is selling/transferring it. In your case there would be no tax on the transfer of the principal residence but there would be tax on the rental property.

my mother past away in 2004. as far as i know the capital gains tax has been paid. but for 7 years the executor has not told 2 of the beneficiers nothing. so if the beneficiers find out the capital gains tax hasnt been paid can we sue the executor.thanks tj

Hi TJ,Yes, that might be a way to go. Before starting a lawsuit though, make sure you have all the facts. It might be a good idea to start by demanding an accounting. If the executor won't tell you anything voluntarily, ask your lawyer to demand the accounting for you.

I have a question My mother passed away on Feb 1st I was left as the sole executor to the estate. She had no property, but she did have A GIC worth $13,029.57 An investment account with $1652.22 and she had $7,104.04 in a personal account for a total of $21,785.83 Oh and I forgot that she is getting a return on her taxes of $703. My question is this minus the probate and lawyer fee's Does the estate get taxed? and roughly how much of a percentage. She lived in Manitoba (Brandon)

I am the executor of my father's estate. He is still living. He has several GICs, Mutual Fund products, all with Canadian banks. Are these considered registered investments? If so, what are the tax implications when he dies? Thank you.

Hi, thanks for your note. You will know that money is in a registered account when the title of the account includes the word "registered", such as Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Registered Educational Savings Plan (RESP) or Registered Disability Savings Plan (RDSP).

It's possible for a person to hold something like a GIC with other assets in a registered account, or just on its own. Look at the statement for the GIC and read the name of the account next to the account number.

A registered account will list all of the assets - GICs, stocks, cash etc - together as a portfolio under one account number. If it's not clear to you, and you have a power of attorney for your Dad, call the bank branch and ask (I'm assuming you can't simply as your Dad or you wouldn't be asking me).

Whether money is registered or not makes a huge difference to an estate. For one thing, the owner of a registered account can name a beneficiary who will receive the money in the account on the death of the owner. This means that the funds might not even be in the estate.

For a second thing, registered funds are taxable. Money put into funds such as an RRSP consists of pre-tax dollars. The owner doesn't pay the tax until he or she actually takes the money out. Dying automatically triggers a cash-out, so the taxes become payable as soon as the owner dies.

The tax is payable by the estate no matter who receives the registered money.

Thank you for providing this very informative collection of material on Estate Law. My parents are in their mid-80's, and although they are planning carefully to ensure a minimum of problems arise when they are gone, we in the family are all learning how very complex these matters are.

One thing that I haven't seen addressed in your posts is the question of just how an 'estate' is defined. Is it the assets/liabilities held by a _couple_, or by an individual?

When the first of my parents passes away, will it be necessary to 'execute' the estate, or will this only happen when the second of them is gone? Their only property (their home) is of course held by the two of them together. It seems a bit ridiculous to have to go through the entire process of executing an estate twice ... (and probably in close proximity ...)

Apologies if this is a 'no-brainer' question, or has already been addressed here ...

My father had two daughters from a previous marriage in India. He married my mother and had children with her in Canada. He 40 years ago and hi wife got the house. She has made a will that states her estate goes to her children in Canada. Before my father came to Canada, he made sure my sisters were set up in india with houses and a farm to collect rental income. Can they make a claim on the estate when our mother passes?

As I understand your situation, your Mom owns the house outright, having inherited from your Dad. You are wondering whether your half-sisters, who are no relation to your Mom, could claim against the estate. As a general rule, only certain people can claim against someone's estate, including minor children, handicapped children and spouses. These girls are not even related to your Mom so they certainly don't fit any of the usual categories. In my opinion, if they thought they were entitled to something it would have been from your Dad's estate, not from your Mom's, and even then they'd have to prove they were dependents who hadn't properly been looked after.

Hi Lynne,I am the sole adult child of a divorced mother in her 70s living in Canada, though I have lived and worked overseas for years (as a non-resident I currently have no tax liability here). Hers is a small estate – her home, car, belongings and a few bank accounts, mutuals & RRIFs – for which I am named in the will as the executor and main beneficiary. My question is would it be better (ie. less net cost) to become a joint holder of my mother’s property and financial assets now, which I assume would expose me to taxation, or go through probate upon her death. Alernatively, would it be better to transfer some of these assets to me as gifts now?

Scenario: Grandma dies and leaves RRSP, RRIF, and Life Insurance to her 4 adult children, the named beneficiaries. 8 months later, one of the beneficiaries dies, before the funds have been disbursed. What happens to the share that would have gone to the child that passed? Said beneficiary was alive and well at the time of the policy holder's death, although it was known to the family that said beneficiary was dying of cancer. Do the funds go to the estate of the deceased beneficiary? Or is his share forfieted because he died before disbursement?

On April 14 you said "If the children later sell the house and it is not their principal residence, yes they will have to pay tax on the gain, as you have described." In this case, is the gain the difference between the current market value of the inherited property and the market value of that property at the time of the parents death? Or is the gain from when the parent had originally purchased the property and todays current market value?

Hi, this is something I'm asked frequently so I should have been clearer in my post. The child will pay the gain on the value from the day the child acquires it, NOT from the date the parent originally acquired it.

Hi Lynne, My father died a few years ago, leaving everything to my mother. My mother was recently injured and is now incompetent. My sister and I are sole beneficiaries in her will, and also have power of attorney. She owns a numbered company that holds stocks as assets, and my question is whether anything can be done with ownership of the company or assets to reduce taxes payable on her death.Thanks in advance for any help.A.

Our Aunt died in 2006.benefactors she left in her will, predeceased her. She left no new will...Lawyers in possession of her will were notified of next of kin 2 weeks after her death and did nothing with the estate till 2009 when he finally sent letters to next of kin stating they needed to sign letters giving them Executors rights as we lived in the United States and could not legally be named as Executor as she was a Canadian citizen. We did this and now even though we got a lawyer from Canada the Executor has ignored our attorney requesting date he filed a Tax Clearance so that the estate can be finalized and monetary disbursements can be made. Property was sold in May 2010 and which everything was taken care of according to the Statements of Accounts,creditors,accountant fees,T3Trust, income taxes..everything but yet Executor will not give us the date of when he put in for the Tax Clearance or if hes gotten it back. How can we force him to give us/our attorney this information. This Executor has delayed the distribution of the Estate and dragged this out for over 5 years and we are very very upset by the way he is handling this Estate. Due to sitting on the will for over 2 years we lost 250k on the property as we had a few buyers willing to pay for this PRIME LOCATED PROPERTY up till 2007 and we couldnt do anything.

I am one of 2 benefactoers of an estate currently in probate. Most of the money we will be receiving is from her RRSP account. I realize that money will be taxed but my question is this. I currently learned of the ODSP and I have Multiple Sclerosis. I am not a relative of the deceased or was I a dependent in any way. I do not receive benefits from the government as I have been able to stay employed. Is there a way if I open an ODSP account, that I can avoid the taxes on her account. Can her RRSP be transfered to me tax free? Thank you in advance.

If a person inherit a revenue property that was originally purchased many years ago for 100k and is now worth 300kwhen the beneficiary (that person that inherited)eventually goes to sale the property - say it will be sold for 350k, is he subject to a full capital gain tax, going back to the original purchase price of 100k or just on the gain made from the day he was an owner (50k)?

Dear: Lynne:can you please advise if or not the executor (My eldest brother of three sons, two of whom reside in California,USA)have ramifications in conducting the duties of executor in Canada? Our Mother has suggested and she is considering, depositing her investments and putting them into three (3) separate accounts (Maybe GIC) and naming each of us as a benificiary on one of those three accounts. Do you feel this is a wise move?

Hi Lynne, Are there any tax implications to funds received from the sale of our deceased parents property that is outside of Canada. The probate was done in that country, and all taxes applicable to the sale was also paid. We the children are living here in Canada, should we have to pay taxes on the net sales here in Canada? I would appreciate any help you can offer.Thanks

Hi Lynn,I have anxieties over this question I have. I live with my 82 year old father. He intends to leave this house, our principal residence, to me on his death. If he passes will I lose my home? I have very little money and could not afford to pay any taxes and Dad is not that well off to be able to leave a lot behind. Please help if you can put me at ease.

Hi,One of my parents passed away and I will inherit some shares in various public companies. These are dividend bearing shares. The shares would simply be transferred to me as I have no intention of selling them at this time. What, if any, are the tax implications when this transfer is done and is there a way to minimize any tax?Thank you.

Hi lynn,My father (UK resident) has died leaving shares quoted on the Canadian stock market- value $35000. My sisters and I (all UK residents) are the beneficiaries and are applying for grant of Probate in the UK. What taxes will be payable in Ontario and do we need to obtain probate in Canada? Thanks for your help

Hi Lynn,My father's third wife has is the executor of his estate. She hadn't notified any of his children upon his death, and didn't indicate if there was a will invloved. She has ignored letters indicating the need for such information for eight years. What are the possible routes to take in this situation, because we all agreed she has something to hide. I know (from a relative)that he had a private accounting business and wasn't claiming income tax from 1993-2002.Would the best bet be to check the Ontario probate records, and how would a person get this information when living out of the province?

Hi Lynn, I am listed as the sole be eficiary of my Parents principal residence... Which is a rebuild on an existing property, they basically built there dream house where they have always lived. They also own two other rental properties through our family business. I assume that because their principal residence(dream home) is the only residence they own personally then there would not be capital gains payable on the home?? Just on their assets?? I'm concerned about having enough money to cover this amount as they built their home for very cheap-- doing a lot Of the work themselves but it has recently been appraised for a million+... We love in Alberta. Thankyou very much for your reply.

My husband's aunt died recently with a will that states he and his siblings and parents will inherit, equally, the whole estate, which consists of her home, various investments such as stocks, bonds, etc. The full value is between $1,200,000 and $2,200,000. Because the aunt is not a parent, does that change how the monies, when dispersed are taxed? Or will the estate simply have to pay capital gains tax as in situations where wills list children as benificiaries? Thanks. We had assumed, up until doing some research on this site and others like it, that when my husband got his dispursed share, that we would have to pay income tax on the monies received.

The good news is that no, your husband won't have to pay tax on his inheritance, at least not from his own sources.

You're right that the estate has to pay taxes before the assets are distributed to the beneficiaries. This of course reduces the size of the estate available for distribution, which means your husband and the other beneficiaries may receive less.

As you mention, there may be capital gains tax, depending on the type of assets and the amount of time they have been held, combined with any exemptions available to the estate. This isn't the only kind of tax possible though. If the estate has assets like an RRSP or RRIF, all income tax on that has to be paid too.

When a person owns a RRIF or RRSP, it's considered to be cashed out right before death, which makes all of the money in there taxable.

I have a question and wonder if you can help. It is somewhat complcated but I will do my best to expalin.

My husband and I built a home 2 years ago, The home has a mortgage which we pay weekly as well we pay all the bills and taxes.

Here's the issue.

We pay everything in cash and pay it all to my father in law who pays the bills, taxes and mortgage which are all in his name. We have no receipts and have been told that when he passes the house will be then willed to us.

The question I have is will we have any issues or taxes to pay when the home is left to us. I have been told by others that we may have to pay Capital Gains tax when we receive the home.

Is there anything we should know that we are not aware of. My parents do not like the situation and have advised that we set up our own mortgage and get the home into our name as soon as possible, and of course my father in law says the way it is setup now is the best for us in the long run.

My advice would be to run, not walk, to a real estate lawyer and find out how to protect yourselves. Here's what I see so far. You built a home that you don't own. You have made two years worth of mortgage payments but can't prove it because they were in cash. You hope that one day the home will be willed to you but in the meantime it can be sold or mortgaged by someone else. You've had bad tax advice, since capital gains is not paid by the person who receives a home, but by the person who sells or transfers the home. Nothing here is in your favour. You have no protection or control. Don't wait a day longer; get this fixed ASAP.

When my mother passes away both my sister and myself will inherit her house. We plan to sell the house and split the proceedings from the sale. Are we entitled to capital gains exemption from the sale? If so, how much is the capital gains exemption? Neither myself or my sister has used the capital gains exemption in the past. The value of the house is approximately $170,000. Does the estate administration tax bracket EAT in Ontario apply to the $170,000? I believe this is also referred to as probate fee in Ontario. IE 1/2% for the first $50,000 and 1 1/2% for the next $120,000. Do you have to pay tax when you sell the house? Does the capital gains tax exemption apply when an individual dies and leaves you their primary residence home? If myself or my sister decides to make the house their primary residence as neither of us currently owns a home will anything change? Thanks for your help!

Capital gains tax is a tax on the increase in value of a property while someone owns it. An exception to the rule is a principal residence. And capital gains tax is paid by the seller, not the buyer/inheritor.

When your mother passes away, the first transfer of the property is from your mother to her estate (legally this is known as a transmission). There is no capital gains tax at that time because the house is her principal residence.

The next transfer is from the estate to you and your sister. Most of the time, this takes place immediately after the transmission so there is no opportunity for the property to increase in value while the estate holds it. If it stays in the name of the estate for a long time and increases in value, then the estate might have to pay tax on that increase.

The next and final transfer is from you and your sister to a third party. As I understand it, the house is not the principal residence for either of you. This means that any increase in value will be taxable. However, if you sell the house pretty quickly after you inherit it, that increase should be small, if there is any at all. Except in very volatile markets, there is usually very little increase to deal with.

Be careful with the probate paperwork; do not understate the value of the house on the inventory. If you do, and then you sell the house for a decent price, it will appear to have increased in value.

I realize that this is a general sort of answer, but that is intentional. For specific tax advice, you should sit down one-on-one with an accountant.

Hello. My question is: what are the tax implications for this situation:

The husband passed away, appointed his non-Canadian citizen wife as his executor. He has shares in a privately owned company and these shares are willed to the daughter who is a Canadian citizen -non- resident.

The shares will not be sold.

The daughter (4years old) will just hold the shares. The company deals in property rentals.

Are there taxes needing to be paid in this situation? The shares are not traded so if there will be taxes what are the taxes on?

And what are the implications if the executor and guardian of the child is a non Canadian citizen?

My husband is a canadian citizen and last year received his share of the cash profits from the sale of a property owned by his father who passed away three years ago. The property had been transferred to his brother's name after the death and he sold it last year. I know in Canada there is no inheritance tax, but does this lump sum of money wired to my husband's bank account need to be shown anywhere in his tax forms?

I've read that banks disclose information to CRA when larger sums of money are deposited to accounts, do you know if there is a minimum amount at which this happens and if so, how would we show that is was from the sale of a foreign property owned by his family?

My father wrote a will long time ago and named my mom, my brother, my 2 sisters and I as the beneficiaries but unfortunately, one of my sisters died 10 years ago. Will her husband and her only son take her part and become beneficiaries? Her husband has got married right after my sister's death? Should my father delete my sister's name from the will if he does not want to leave money to her husband?

Hi there,This kind of question always has to take into consideration anything specific that is said in the will. Most of the time, a person will say that money goes to one of the kids, and if the child should for some reason die first, the money goes to that child's children. But this is not required by law. It could also say that if the child dies, the money goes to the child's siblings. So the wording of the will is always important.

Having said that, I can tell you that the spouse of a child does not automatically inherit anything. In fact, in all the years I've been doing wills, I can count on one hand the number of times that a parent said they want a bequest to go to a son-in-law or daughter-in-law. Normally inheritances follow the bloodlines.

This means that most likely your sister's son will inherit her share. You don't say how old the son is, but your father can state the age at which your sister's son can inherit his share.

Although I've said that the husband won't inherit anything, remember that if the son is a minor, the son's money could well be put in the hands of the husband for managing. If your father wants to leave money to your sister's son but doesn't want the husband to manage the money, this can be set out in his will.

I don't think this is a will that your dad should be doing without legal advice. I'd hate to see it end up in a messy court application. It would be worth his peace of mind for him to see a lawyer to have a will prepared.

Hi Lynne - question on the house deed. My father has the house in his name only. My parents have been together for 60 years (and in the same house). Should my mother push to have her name added to the deed or is it assumed that after 60 years of being in the house it's considered hers too? My father's health is starting to fail and I just want to make sure everything is in place. He did leave her the property in his will, but not sure if that would cause tax issues?

My Dad passed away several years ago and my mom payed off the house from his life insurance so she owned the house outright. My mom recently passed away and we discovered that she put 2 of us kids as "joint tenants" shortly after his death but there are 4 of us.

The question I am wondering about is that I was thinking about purchasing my moms house and to buy out the other 3 which no one is against...How does it work for paying capital gains when it comes to this. Do we pay taxes on the entire amount we all inherit (meaning all for of us individually) or does it come out of the my moms estate? Wondering if it's something I need to consider if I purchase the property and ensure I don't put myself into trouble financially when it comes to it and wasn't expecting to pay out more cash. If it does come out of her estate, can the executor of my moms will turn around and bill us all for it? Thanks for your help!

We are doing some Estate planning and there is property involved. Looking at Service NB Parcel Information we see that one of the properties has three people listed under the Interest Type. Two of them who are listed as Owners are husband and wife, but they are both deceased. The third person is a daughter who is shown under the Interest Type as having a "Life Interest" - can you explain to me what that might mean? Thanks

I know that you have to pay tax on a RRIF RRSP and investment accounts when a person dies. However, I have a joint bank account with my mother and I understand there is no taxation on this account when my mother died. Is this correct? Thanks.

I live in New Brunswick and my husband Uncle want to give us his house as they have no kids and I was the care taker of his terminal ill wife until she passed last fall.I also agreed to care for him if he was ever to need in.As he doesn't want to go to a old folks home.So I am wondering can he give us the house if he hasn't passed away? Please email me at sharontownes85@hotmail.caThat is not my primary email so don't bother spamming it spammers.

Yes, he can give you his house. He can give his assets to whoever he wants to. Be careful though; if you or your husband are named as power of attorney for the uncle, you are not allowed to transfer this house to yourselves on his behalf.

Hi Lynn, I have a question. My husband died resently, and I am now taking the steps to see if he has a will, but I was wondering. Can a spouse decline the other spouses inheritance if the one that died owes more than he is worth??

No, your wife is not automatically entitled to half of what you inherit, unless of course the inheritance was left to the both of you.

If you are asking whether she would be entitled to half if you two divorced, the answer is still no, as inherited property is exempt from distribution on divorce. This assumes, of course, that you haven't put the asset in joint names with her.

You can add someone else to the title if you like. I would suggest that you get some advice on whether there are any present or future tax implications for you or the other person before you go ahead.

One of my parents has recently passed away and the siblings have come into a little issue with one of the major banks on transferring the accounts to the surviving spouse. The institution states that they can not transfer the accounts even though they have a copy of the will and a lawyers certification of tis will as true and real. their contention is that sincce the accounts are valued at more than one hundred thousand dollars and that they need a letter of probate and other documents. I quess, basically my question is is there a provincial or federal law or regulation that supports their argument or is it just an individual bank policy? Afterall, they have all the proof they need to proceed to carry out the wishes of the deceased. This situation is Alberta based. I look forward to your reply and thanks in advance for answering.

This is a bank policy, based on the fact that the bank would incur liability for the funds if it was later discovered that there was a later will, or the will was found to be invalid. A grant of probate is a court order that indemnifies anyone who follows it. You will find that all banks, in fact all holders of assets, will have a similar policy.

Hi Lynne,If my estate has only cash dollars in it in my bank account + some of my personal furniture and other household items, would my daughter have to pay tax on this money. I live in Thailand and will be selling my property here so That she doesn't have to deal with this difficult process therefore my estate will be cash only. If she does have to pay tax on this money how can it be avoided ...??

Hi there,I know it looks like it disappeared, but in reality none of the posts show up until I've had a chance to see them and click "ok". I do this to keep out the spammers. Also, I tend not to click "ok" on the ones that I believe would cause someone to have "poster's remorse".

The information in the site is invaluable. Thank you so much! I am presently a non-resident of Canada, however I am planning to return one day for retirement. I have a large portfolio of stocks in a Canadian account. I understand that upon my death, the stocks will be deemed to have been sold. My question is this: is it possible in any way to leave the portfolio intact, leaving the income that it produces (from dividends) to my surviving spouse and children?

You can definitely leave the portfolio intact. Your estate will continue to generate income (dividends, interest, capital gains ...) and taxes will have to be paid on that income by filing a T3 trust return every year. It may also be beneficial to flow through income to low income beneficiaries. This will help reduce any taxes owed by the estate. Also, if you have losses during the first year of the estate, these can be brought back to your final return to reduce taxes.

Hi Lynne,My mom passed away in 2007 and there are 4 of us that inherited her principal residence (25% each) but only 2 of us (my brother and I) have been living in the house since her death. The FMV at the time of her death was $225 000. This year, my brother and I are thinking of buying out our two sisters share. Is it possible to buy them out for less than the current FMV of the home so their capital gain on the sale will be reduced ? For example, suppose the FMV of the house is $300 000 today. Their gain on the sale would be ($37500/2) or $18750 each of which 50% taxable income. If we were to buy-out their share of the house for a lower price than the FMV, they would be able to save on taxes. Can that be done ?

Hello, my father bought a house with a mortgage and rented it to me, he is non resident in canada. I have paid rent and with it he paid the mortgage and property tax. He has a will that says i will inherit this property when he passes. Will i have to owe tax?

My mother recently passed away in BC. My sister and myself are the sole beneficiaries. I have been a non resident of Canada for 40 years. I am currently retired and living living in another country where I do not file or pay taxes. What is my Canadian tax exposure on the inheritance in this case.

I believe my dad sold some farm land to my mom about 15 years ago. Now dad is gone and mom plans to put my sister's name on the title to the land. This will avoid the capital gains on anything that my sister's name is on, correct? If there is any land that does not have joint ownership at the time mom passes, will it be subject to capital gains from the 15 year ago transfer? Or can you transfer from spouse to spouse like that to lower the capital gains? Also then can my sister put her son's name on the land and avoid capital gains again for the next generation? Then back to mom's estate.. If the rest of the estate is cash and in RRSP"s, that cash will be considerably less once the taxes are paid. What about cash outside of the RRSPs? Is it affected in any way? This is in Alberta.

No, you are not correct. Please don't do ANY of this until your Mom has sat down with an accountant and found out exactly what her tax exposure will be. If avoiding capital gains tax were as easy as this, don't you think we'd all do it?

Hi,My Grandmother has an estate worth over $1.2 million. At our most recent visit to the bank with her investment manager, we were told that in order to avoid "inheritance taxes" (which I realize don't exist in Canada), she should put her money into trusts for her three children (my mother and two uncles), in order to avoid the extra tax on her estate when she passes. She is a 90 year old widow living in Ontario. She is already taking advantage of the tax-free savings accounts. What are these trusts and how do they avoid tax? Do they continue to earn income?

Hi,I'm not an accountant or an investment advisor, but I can certainly give you my impressions of the situation.

You're right that there are no inheritance taxes (i.e. to the beneficiaries) in Canada and your grandmother won't automatically lose a chunk of her estate in tax unless her investments are registered, such as a RRIF. RRIF funds can't be put into anyone else's name while your grandmother is alive.

I think in this case the advisor might be talking about probate fees, which are sometimes called probate taxes. These taxes are against the estate, not against the beneficiaries.

In Ontario probate fees are among the highest in Canada. It's not unusual to receive advice about how to reduce probate fees. Funds that are held in trusts when your grandmother dies won't be subject to probate fees when she dies, which is why I believe this is what the advisor means.

Funds that are held in these trusts do continue to earn income. The income in them can be paid by your grandmother, by the beneficiaries or by the trusts themselves, depending on how they are set up. I strongly suggest you consult a tax accountant about this before you take any steps.

I'd also like you to ask the accountant about any tax hit your grandmother might incur at the time the trusts are set up. This will depend on how the funds are currently held, and other factors.

My father is 92 and lives in long term care and cannot travel. His pension and RRIF cover his expenses. He has $400000+ in non-registered mutual funds and bonds. When he passes, I believe that he will pay income tax on the RRIF but only probate fees of 1.5% would be paid on the $400000 prior to distribution to his heirs (my sister and I). Is there any reason that the $400000 (or part thereof) can't be distributed (gifted) to the heirs prior to his passing? He cannot spend it and wants to give us a chance to use it before we are too old as neither of have children to pass the money on to.

If your father wants to give you two some of his assets now, he can do that. It's a legitimate estate planning move, as long as he has mental capacity to understand the consequences of the transaction. Please make sure that he has enough still saved to cover expenses if his cost of care increases, for example if his needs change and he needs 24/7 nursing. If either of you is acting under Power of Attorney, remember that a POA is not allowed to use a person's assets for the POA's own benefit and could land in legal hot water for that.

My wife passed away a few years ago, I did file her last income tax return, before her death she was paying off a tax debt to Revenue Canada that occurred before we were married. My wife's estate was valued at $6,000.00 and the funeral costs were $14,000.00 therefore leaving no monies left in her estate. She also passed with out a will therefore no executor and no will. Would I be personally be responsible for the tax debt?

I'd like to know the answer to this question also...we're going through the exact same issue with my father's passing. No will, no executor...but apparently a lein against the property that isn't allowing us to sell.

I am a non resident Canadian (also now a US citizen). I will have an inheritance from my mother when she passes away. After the estate is settled in Canada, am I subject to estate taxes in the US when the funds are transferred to my US account.

I am Canadian citizen who owns a rental property in the States. My question is, What taxes and how much do I have to pay in the the US and/or Canada if I sell or transfer the ownership to my children in the future. Is it a good idea to name my adult child as co-buyer in case I intend to buy another property? Thanks a lot

My husbands father passed away in April he is the executor. He didn't have much just his house that is to be sold and divided aong the childern. My question is does the house need to be transfered into the executors name before it can be sold?

Hi Lynne, my mother has passed,before she died. she in 2006 told family and friends that she wanted me to have the dwelling that we lived in it was verbal and all family knew about it and agreed with her decision.ive talked also to her sister and a family friend that have told the same . that she wished for me to have the mobile home after her death. its not in the will. does the family have to honor her wishes if it was not in the will . i am the adult son caregiver living whit her for the last 5 years 24/7 caregiver . do i have tenancy rights??? how do i go about protecting my self from eviction if it may happen???

I'm a wills and estates lawyer, so I'll comment on the part that has to do with the will, but I can't help you with regards to tenancy. I've never done any work in that area of law.

With respect to the verbal promise of land, the immediate answer is no, they do not have to honour her wishes if they weren't in the will. The will covers everything she owns, including the mobile home. It's important that this kind of promise - or any promise about giving something to someone - be written down n the form of a will.

Now there is one other legal matter to take into consideration here, and that is constructive trust. If you were promised the home one day, and you made decisions to your own disadvantage (such as deciding to be the caregiver) based on that promise, the law would be on your side. The downside to this idea is that it would require an order of the court. It might be worthwhile discussing it with a lawyer in some detail.

If the family members are agreeable, the will can be carried out, then by way of a side agreement, everyone can transfer the mobile home to you.

Hi,I am the executor to my aunt's estate. I am her nephew, she never had children. She has already told me how she is going to split the proceedings. My question, which was touched upon earlier, but I am still a little unclear, has to do with her home. At the time of her death, is that regarded as the value of her home, and when we sell it, any increase in that value will be considered capital gains?She also has RRIF's, and I assume will be taxed heavily seeing as they are tax deferred?

Hi Gary,At the time your aunt passes away, if her home is sold there will not be any tax on the home. However if it took a long time (many months) to sell it, there could be some tax if the house increased in value while waiting to be sold.

You're right that RRIFs are taxed. The law says that RRIFs are deemed to be cashed in at the date of death, so it all has to be declared as income. The tax is payable by the estate, even if the RRIF money goes to someone directly.

My father recently passed away and I am co-executor for his estate. As per his will his assets are to be divided equally seven ways - six remaining children and my deceased sisters share to her children. In order to simplify the process and avoid delays and needless probate fees, this past summer my father signed all his investments over to joint ownership between him, my older brother and myself. Ownership of his investments has now automatically transferred to myself and my brother. Of course, he trusted that we would ensure that his wishes of equal sharing would be carried out. The entire estate is not large (<$200k). Are there any tax or other issues that could arise when I transfer equal shares to the heirs? Will the government have any issues when I file his final tax return next year? Although I am confident that there are no outstanding bills or taxes owing, I plan to hold back about $10k for six months to be sure. I have not hired an estate professional as I think the process is fairly clear.

Hello Lynn, me and my common law partner emigrated to Canada 7 years ago. Up till then our Dutch home was our primary residence. We still own that and use it as a vacation home. The value is approx.180,000 dollar so less then 100,000 per person. It does not show in our tax returns. But if we'd sell it next year we'd probably receive more than $100,000 CND each. THen it has to show on our next tax return as having funds abroad of over $ 100,000 Is there going to be any taxes to be paid over that in Canada?

My wife passed away a few years ago, I did file her last income tax return, before her death she was paying off a tax debt to Revenue Canada that occurred before we were married. My wife's estate was valued at $6,000.00 and the funeral costs were $14,000.00 therefore leaving no monies left in her estate. She also passed with out a will therefore no executor and no will. Would I be personally be responsible for the tax debt?

Hello Lynn, my grandfather died about 30 years ago and left his land in India to my father. My father now wants to sell that land and bring the money over to Canada. What are the tax consequences of doing this? Will my dad have to pay any taxes?

My mother passed away and has left me her house, her primary residence. I want to sell the house and rent locally. My question is, does it make any difference (eg. tax withholding or cap gains) that I was a non-resident at the time of her passing? I intend to stay in Canada now and file taxes as a resident.

My grandmother passed away in 1997 leaving half the residue of her estate to her son (my father). Her executor is finally ready to distribute the estate. All taxes have been paid on the funds. My father died in1998 and his whole estate passed to my mother. My Mother died in 2006 and her entire estate passed to myself and 2 siblings. Both my father's and mother's estates have been finalized. Who should the funds ($21,000) of my grandmother's estate be directed to? Equally to myself and my siblings as heirs to our parents estates?

My husband passed away 3yrs. ago. The title of our house was in his name for yrs. as I had a business and we were told to keep it in his name so no collector if the business did not make out well could come after it. One month before he died we did ask to have my name put on the morgage papers but was told we only had 3 yrs left so save the $1000.00 and do it then. Well my husband died 8 weeks later. I have since payed the mortgage off and was going to take out a small mortgage to do some repairs but now need to pay taxes to have it changed into my name. How hard is this going to be since my husband did not make out a will and I now have apply for trustee or something.

This isn't going to be very difficult. Because your husband didn't leave a will, there is nobody with the legal right to take his name off the title. The way you get that is to apply to the court to become the administrator of the estate. I don't know which province you're in, but it shouldn't matter, as in all places the spouse is the person with the right to ask the court to appoint him/her as administrator. You might consider asking a lawyer to help you with the paperwork if you aren't confident you can do it yourself. But don't worry - this kind of application is very common and shouldn't cause a problem.

Thank you Lynne, this has eased my mind so much. I did forget to tell you I was in Ontario. It has taught me a very valueable lesson. Everything will be done right now for my children when the day comes for them to deal with my loss. Theresa

My wife and I are Canadian citizens and have non-resident status. We own a house in Canada that we rent out. I am trying to find out if we would be subject to any extra estate taxes in leaving the house to our children. I am hoping that our estate would face tax on the capital gain and that's it. Thank you for your help.

my brother passed away in 2012, leaving me his principal residence and another piece of property. Would the second piece of property be deemed to have been sold upon his death therefore creating a capital gain on his estate return?

Your also forgetting private pension tax. I and my brothers were beneficiaries of my late fathers government pension including my mother. For 1 the governement gives you the MINUMUM payout even though my father paid into his pension for over 30 years. I believe it was only 210 payments total in nova scotia for municipal government and even though the governement probably made 10 times that easilly reinvesting his pension contributions for those 30 years. Any how we got about 74,000 dollars erach of which the government took their cut of almost 25,000 dollars in taxes. So don't say their isn't taxes when someone dies because there is estate taxes, income taxes, admin taxes, burial taxes, man I've never seen so much tax in my life after my dad passed away. The government's "tax" take so far is about $111,000.00 dollars and rising. They are the biggest criminals in history.

Actually I DIDN'T say there are no taxes when someone dies; I said just the opposite. As you are discovering, there are plenty of taxes against the estate, but as I said in my original post, these are not taxes against a beneficiary who inherits something; they are taxes on the estate. Big difference is that you don't pay these taxes yourself - the estate does. In any event, thanks for your comment, as it goes to show all readers what they might be in for when they have to look after someone's estate.

I was the sole beneficiary of my Aunts will. She left me the house, contents and bank accounts. There isn't much in the bank accounts but her house is paid for and just sitting there accumulating operational costs like electricity and maintenance fees. My question is, can I move in there as I have no house. It's mine but not mine?

Why is the house just sitting there? The house won't belong to you until the executor gets the probate and transfers the title, so the executor needs to get on with that.

Remember that the executor also has to pay all bills and taxes before you can inherit. So the executor may be unwilling to allow you to live there before he has a good idea of whether the house will have to be sold for taxes.

If taxes are not an issue, most likely the executor will agree to let you move in while he sorts out the paperwork.

Hi Lynne , my Mother passed away in 2010 . She and my Father jointly owned their primary residence . My father now wants to make an outright gift of this home to me and my brother while he is still alive . Both of us live with our father and this wll be our primary residence in the future . Mothers name is still on title . There was no probate . Will there be any tax or legal implications when he does so?

Hi,Your father can't gift the property to you until the title is in his name alone. He has to take your mother's name off the title. If they were joint owners as you say, he won't need probate for that. He can simply take a death certificate to the land titles office and fill in some paperwork there. That will result in the title being in his name only.

There are no tax implications when one joint owner is removed from the title this way. Also, your father can dispose of his prinicpal residence either by selling it or by gifting it to you without incurring tax.

You can always check tax questions with an accountant, since they are the experts in number-crunching!

Is there anything proactive, as far as gifting to his three children while alive that my dad (widower) should consider before he passes away, to avoid unnecessary money going to the government?He is 86 and may need to be enter a nursing home soon. If he does, I believe the Ontario Ministry of Long-term Care may seek his assets to cover the nursing home cost.He has $70,000 in a joint account with me (his eldest son) but I do not touch the account, other than my name being on it.In addition, he is in the process of selling his house for the fixed original construction cost of the dwelling ($115,000) to his brother by prior written agreement (the brother owns the land). I just want to ensure that his money is protected as much as possible prior to and after his death so that his Will to his three children happens the way he expects it to. Thank you.

I have a serious question to ask you. My husband and I have recently gone to our lawyer to seek out advice in regards to our estate and so on. Currently, my husband owns a corporation in Ontario in which his brother is the partner. The split is 60% my husband and 40% his brother. We all work for the company as well. I am curious as to what exactly has to be in done in order to make sure that if something happened to my husband, I would be the beneficiary to his estate. All of our money is tied up in the business, meaning other than our home, all of his investments and worth is tied up into the corporation. I don't feel as if this is our lawyers specialty and want to make sure that everything is done correctly. My main concern is, if something should happen (god forbidding) to my husband, his brother would inherit everything. Can you please guide me in the right direction in order to make sure our will is done properly. I know that corporations can be tricky with this kind of thing.

Hi,The fact that your brother-in-law is the business partner doesn't mean he is going to inherit everything, though you're right that it all needs to be set up properly.

You've said that your husband owns 60% of the business, so presumably he owns 60% of the shares of the corporation. When he passes away, his shares will be dealt with according to his will.

There is some important work to be done outside of the will though. Your husband and his brother should have a written shareholders' agreement, or buy/sell agreement that says what happens to the shares in the event that one of them dies. Most likely the agreement would say that they have the chance to buy back shares if the other dies. So, if your husband should pass away, your brother in law could buy your husband's shares of the company. They do that so that shares don't get left to children or outside people who are not part of the business.

Now, here is an important part for you. If your brother in law had to suddenly come up with enough money to buy 60% of the company, could he do it? If your husband had to suddenly buy 40% of the company, could he do it? Probably not, if everyone's assets are already being used by the company. So, the next step after setting up the shareholder's agreement is for your husband and his brother to purchase life insurance to be owned by the company. Then if one of them dies, the life insurance money is used to buy the shares.

Say it was your husband who passed away. His life insurancce would be paid to the company. Your brother in law would then use the life insurance to buy the shares from the estate. If your husband's will says that you are to inherit his estate, then you would get that insurance money that was used to buy shares.

I'm sure if you run this scenario past your lawyer, he or she will know exactly what I'm talking about and can guide you to making this concept work for you. And by the way, good on you for doing your homework to prepare for your meeting with your lawyer. Being informed is always a good thing.

There is a life insurance policy involved for what you have mentioned below. I regret not mentioning this in the first post. I will be sure to make sure that the shareholder's agreement is set up properly. I suppose my question is, if there isn't a shareholder's agreement that is up to date or at all, what happens then? Does my husband's will and wishes stated in his will take precedence?

Hi,My brothers and I received a life insurance payment of 32K each, will we be taxed on this amount? Also, we finally sold my mom's home (passed away in 2011), in the interim, my one brother and grandma lived in the house (they were living there with mom before she died), will we be paying tax on our portion of the sale? The house was in my and my other brothers name as coexecutors once probate was granted. My googling suggests that since it was the only property, we will not be owing on either the house or the life insurance.

Hi Ashley,No, you won't pay tax on the life insurance funds you received. There might be tax owing on the house if it increased in value from the time your Mom died until the time it was sold. There was no tax when it left your Mom's name, because it was her principal residence. But it can incur tax while it's in the name of the estate. Those taxes are not payable by you and your brother personally, but they do have to be paid out of the estate before anyone receives the proceeds. Easy way to figure out if there is going to be tax: did you sell it for more than it was worth when your Mom died?

My mother in law has both her sons as joint owner of her bank account with instructions to clean out the account once she passes.!! We were informed that the government is considering changing the rules so that the recipients would still have to pay taxes on the account. Also she is leaving them her home, to be sold and shared etc., What type of taxes will they have to pay on the property, will this fall into the area of increase in value since she purchased it or since her passing and will there be any other Taxes of any description to be paid on the cash.Also what is the minimum amount a person is permitted to leave anyone before they would be subject to paying any sort of tax. I was left a small amount of cash recently from my mothers bank account that wasdivided between five siblings will any of us have to pay taxes on this?Thanks for you advise.

Wow. A whole lot going on here. Why on earth haven't you lot gone to see an accountant to talk about all of this stuff? This is exactly the reason that home-made estate planning with no advice is not a great idea.

You won't pay tax on what you inherit under a will.

There is no minimum amount that you can leave a person before they pay tax. Nor is there a maximum.

If the house in question is your mother in law's principal residence and is in her name only, there will be no tax on the transfer to her sons when she passes away.

The bank account could be problematic, but not because of taxes. I don't know what you mean by "still" pay taxes. I've heard no talk about the government making bank accounts taxable. You may be referring to the fact that intergenerational bank accounts are considered by law to be held in trust for the estate of the deceased parent.

These are general rules that I've just mentioned. It would probably be a good idea for your mother in law to spend an hour or two with an accountant or estate planning lawyer to find out how her specific situation is affected.

What about money that is waiting on the sale of a house? I will receive an amount of money after the house sells, as per the will. How long will I wait to receive the money and will this money be taxed? Thanks in advance.

No you won't pay tax on what you inherit. There may be taxes in the estate if the house was not the deceased's principal residence, but that tax is paid by the estate, not by you.

As for how long it will take, that is almost impossible to predict. You have to factor in how long it takes to sell the house, how long it takes the executor to get his/her accounting together, how long it takes beneficiaries to sign releases... and maybe the executor won't distribute the money until the tax clearance certificate is received. So it could be anywhere from a couple of months to a year. Wish I could be more precise but there are too many unknowns to deal with!

My husband died after being very ill for a number of years. We always intended to put my name on the house title for our marital home which we lived in for 10 years but just never got around to it. He did have a will and left everything to me as his wife and there are no other beneficiaries and it states clearly in the will the property address(our home). I did pay probate taxes on the home because someone told me I had to do that as I was not on house title even though it is our home and he left the home to me as his wife in the will. I am also the executor and filed his final income tax return already but did not put our home on it as a capital gain. Should I have claimed it somewhere on his final return or should I file a T3 trust return for his estate as the executor. Apparently I only have till March 15th 2013 to file anything else I may have overlooked or owed to CRA.

Also, How long do I have to change title on our home to myself. Is there tax implications when doing that. The mortgage was also in his name only and I have just continued to make the payments for the last year and pay the property taxes. I did notify the mortgage company as executor that he had died. The payments just come out on automatic debit from our joint account. I think this is a great site for folks that need help and don't have much money to get legal advice.

Don,t know if my first post took. My grandmother made my brother,sister and myself joing on her home with herself, this way her house would pass to us. She now finds she cannot continue to live in her home as she will need to go to a nursing home. Us siblings do not want to have tax implications upon selling as we have each already a principal residence. Should we revert the ownership back into my grandmother name only, we were told we could sign off the home, and we were told we could do a "deed of trust" don,t know exactly what that would do. I am so confused not sure what we should so.

Hello:I'm still working on my fathers estate after 3.5 yrs. All the outstanding investments have now been paid to the estate. I understand that there is an out of country tax on the inheritance. (My sister lives in the States but has remained a Canadian citizen). Do you know how much this tax is (we the rest of beneficiaries live in Sask).I have my fathers accountant doing the income tax etc on this and he is checking with a specialist as well. So I thought I would look into this myself and have a better understanding of it hopefully when it is time to pay everyone out.M

Hello, just like everyone else here's my question.My sister lives in the US and is still a Canadian citizen. Our father passed away 3.5 yrs ago and I'm just about finished the estate to be able to distribute the inheritance. I have been told that since my sister is a non resident that there will be a tax on her inheritance. Do you know what the percentage will be and is there a way around this issue. There are 3 of us and the other 2 live in Saskatchewan.

Question: my mother passed away and gave her house as inheritance. However the house she lived in had an second appartment which she rented and claimed income on. My question since the house was her primary residence would that fall under the exception clause or will we have to declare the increased value of the house since purchase?

Hi LindaI was requested by a trust company to submit my SIN # for reasons unknown. My Mother passed away and as we all live in different provinces the request was not fully explained to the beneficiaries. My bank told me it was for any taxes that made have to be paid but if the estate is converted into cash and taxes are paid by the estate, then what taxes am I liable for. Thank you Maureen

Hi, I am not sure if you addressed this but I wanted to point out the following situation that happened to my clients. It is regarding this paragraph in your article:In practice, your estate would pay those taxes, even though the person named as the beneficiary of your RRSP or RRIF is not your estate. You can avoid paying those taxes if the beneficiary you designate is your spouse or a disabled child.

My client (age 50) passed away suddenly. His will left his estate to his 2 grown children. His RRSP had the mother listed as the beneficiary. The RRSP funds were paid out to his mother 100% (no withholding tax) and the entire amount is added to the client's final return, generating a tax bill of in excess of $100K (resulting mainly from a $250K RRSP). The tax liability is paid out of the remaining estate before it is distributed to the 2 children. The mother (who received the RRSP payout) received that money tax-free while the children effectively paid the tax. I am sure this was not the intention of my client but this is how the law works. Many people may not be aware of this rule.

My mother died without a will, and I have recently become the executor of her estate. Her sister, my aunt, died about one month prior to my mother's passing in 2012. She left my mother about $50K in RRSPs. I am about to liquidate these RRSPs without a penalty because of the circumstances, but I'm wondering about the tax implications? My mother did not have any income other than CPP/OAS/Guaranteed Income Supplement, and about $500 in interest per year from a $50,000 GIC that she had in my name and hers. Her total annual income was about $12-15K. My understanding is that she would have only a minimum tax liability. Is this correct?

Hi Susan,Thanks for your input. The readers of this blog ask me an awful lot of questions that could really use the expertise of an accountant rather than a lawyer so I'm thrilled when an accountant adds her comments.

I have addressed the situation you mention, and I likely will mention it many more times. People have a hard time accepting that one beneficiary may receive an asset while a different beneficiary pays the taxes on that assets. It seems counter-intuitive, and I agree with you that it's not what the deceased usually intended.

Unfortunately the lack of legal or accounting advice during the planning stages leads to situations like this, and, heartbreakingly, to family arguments later.

My brother just passed away in BC. No spouse, no children, no will, on executor. We though estate was less than $30,000. Just advised he has a company death benefit of over $90,000. There is just me, another brother, and elderly parents. I am taking on the estate. How do I become executor, or administrator, or whatever, in a legal manner that will be recognised by banks, government etc?

Hi lynne, i am a resident of the province of quebec. My husband passed away sept 2012. I inherited a substantial sum of money due to his insurance policies, ie private insurance, work insurance and his cumuted value of his pension. we own two properties. One being a house as main residence and the other a condo that we are renting out to my parents. The money portion of the estate is now invested in GICs as rrsp. What i need to know is if I was to die, how much tax would my kids have to pay on the estate. I have three children and my will stipulates that it is to be devided three ways. Also, if i were to move to ontario what would be te consequences as well when i die. Thank you.

In terms of taxation, things will be much the same in Ontario as they are in Quebec, with one difference which I'll get to in a minute. Tax on RRSPs and capital gains tax are the same in all provinces because those taxes are federal.

Understand that your kids themselves don't pay any tax when they inherit from you. There will be tax, based on what you've said in your note, but your kids don't pay it; your estate pays it.

There will be no tax on your principal residence, as that is exempt from capital gains tax. Your condo, however, is taxable. Your estate would have to pay tax on the increase in value from the date you obtained it to the date you pass away. This is the same whether your will gives it to your children or your estate sells it.

The RRSP that you own will also be taxed. When you die, your RRSP is deemed to be cashed in, therefore the whole thing becomes taxable. Your estate pays that too.

The difference that I mentioned above is in the payment of probate fees. In Quebec, if you have a notarial will, you don't have to go through the probate process. In Ontario, like everywhere else in Canada, your will would have to be probated and there is a charge for this based on the value of your estate.

Thank you, Lynne. My dad has a simple will (principal residence in Canada, 40k condo in FL, non RRSP trading account). I am Canadian, my sister American. What concerns might the Estate and/or my sister have as an American beneficiary? Is it wise for me to be the Executor or do you normally advise against that? Very kind of you to take the time. :>

There is nothing in your note that would suggest that you shouldn't be the executor. It certainly makes more sense than your sister -who lives in another country - acting as executor.

In terms of concerns for an American beneficiary, there isn't really much for the estate to worry about. The beneficiary may be subject to American tax, as their system is different from ours, but that is really for her to figure out, not for the estate.

Hi Lynne, question. If a beneficiary inherits a revenue earning property from his mother and the beneficiary decides not to sell the property,but rather run the business instead. is there a capital gains tax payable by the estate or is it simply deferred until it may possibly be sold sometime in the future.

The question I have about this situation is whether the property has actually been fully transferred to the beneficiary. Hopefully it has, and hopefully he is not trying to run a business he doesn't own. The estate pays capital gains tax (assuming that a revenue property is not the principal residence) when the property transfers out of the name of the deceased. Usually the second part of the transfer - from the estate to the beneficiary or buyer - happens quickly enough that there really is no occasion for capital gains tax to arise. Whether the beneficiary sells or carries on the business is of no interest to the estate, as it is the beneficiary's tax at that point. Sounds to me as if this beneficiary is trying to skip the second part of the land transfer, perhaps unintentionally. If that property transfer hasn't been completed, the executor of this estate better get moving and finish it off before he costs the estate some real cash. You should probably see an estate lawyer to finish off this estate.

Both my primary residence & my investment properties have the names of my estate beneficiaries. ( Wife & Son). In this circumstance do things change on inheritance? And if not is the calculation of capital gains etc are based on proportionate ownership etc. For Eg. If all assets are owned 33% each? thank you. Your replies have been extremely helpful. Regards - G Shermon

Hi Lynne,My husband is a permanent resident and will be applying for Canadian citizenship. His parents are sorting out their estate (in Ireland) and were wondering about the laws in Ontario/Canada for inheriting when the property/inheritance would be in a different country. What tax would my husband be liable for on that inheritance here? What if he has to pay tax on it in Ireland first?Any information would be helpful. Thanks. M Tyrrell

My sibling is considered disabled mentally and is on government assistance. There are several surviving siblings including my disabled sibling. Can the government force all proceeds of the will to go to my disabled sibling even though my mother willed the money to all equally? If the disablef sibling does inherit all the money his assistance will be likely be taken from him. The sibling is doing quite well on assistance as a frugal responsible adult with the max savings they are allowed to have while on assistance.

The government won't have anything to do with it. It's possible that the court that processes the probate might want to change the distribution, but that is pretty rare. It generally only happens when someone (either a trustee or the public trustee) asks for that on behalf of the disabled person. The smaller the amount going to the disabled person, the more likely it is that the judge might want to make a change. As I said, it's possible but not really likely.

You're right that receiving an inheritance can bump a person off their government benefits. However, money left to a disabled person is generally not paid right to them, unless of course it's a physical handicap which wouldn't impair their ability to handle money.

Funds inherited by disabled persons are usually held in a special type of trust called a Henson trust. This kind of trust is available everywhere in Canada except for Alberta. Using a trust like this to hold the inheritance money does NOT result in loss of government benefits.

My mother has just died leaving her estate to my brother, sister and I (equal amounts) and the estate is all cash. My father died in 2012. She was resident in BC and I am resident in Ontario. Is there any tax payable on this inheritance?

My father has always lived with his parents as he could not afford his own home. My grandmother just passed away and my grandfather has dementia and is in a nursing home. My grandparents had purchased the home in 1997 and them, along with my parents lived at the home. Their Will states that the house will go to my father upon both their passings. Will my father have to pay estate taxes? The house has always also been his principal residence. We live in Alberta.

Before I answer your question, I just want to clear up one thing. A "principal residence" is not just a place where someone lives. You have to own it for it to be your principal residence. Therefore, up until now, it hasn't been your father's principal residence, even though he has always lived there. It's one of those legal terms that means something different in legalese than in plain English.

In any event, the house HAS been and still is your grandfather's principal residence, even though he presently lives in a care facility. Capital gains tax is all about who is selling or transferring the property. Therefore when your grandfather's will passes the property to your father, the estate will not incur any capital gains tax on the house. Your father won't pay any taxes either, because inheritances are not taxable in Canada.

My dad is considering selling the house in the next 2 years or so, he may wait until grandpa passes or he may sell while grandpa is still alive. In either event, will he pay taxes when he sells the property?

Your dad can't sell the house if he doesn't own it, unless of course your grandfather had given him a power of attorney that allows him to do so. And if he does, the money MUST be invested in your grandfather's name while your grandfather is alive.

As I said, there is no tax on your grandfather's sale of the home because it's his principal residence.

i keep reading if your a poa or executor of a will you can not inherite property that has been willed to you. is this true.the reason i ask is my dad has willed his farm to me and two of my brothers and since my dad has 12 children in our family this has upset most my other brothers and sisters and i to Dont think it is fair and i just want to share Everthing fair and equal down the middle but my one brother Dont want to do this. i need to mention the two brothers who are to inherite the farm with me are poa and executors. so are they not entitled to inherite the farm with me and i can sell it after and split the money fairly with all the family

No it's not true that executors and POAs cannot inherit. I've never heard of any jurisdiction where that's true.

Perhaps this misunderstanding comes from the fact that people in those roles are not allowed to take steps that would allow them to profit from the person they are looking after. An executor has to do what's in the will, and not change things to his own advantage. A person acting under POA can't sell things to himself or take them for himself.

It sounds as if there might be big trouble when your Dad passes away. You might want to hire a trust company to act for the executors to show everyone that things are being kept honest and above board.

My father currently has stocks that he has in a self directed rrsp. Before he passes away he wants transfer the stocks from his rrsp to me and my sisters stock accounts that are also self directed, all with the same financial institution. Can those stocks inside the rrsp be transfered to another self directed account that is not an rrsp, or do all the stocks inside my dads rrsp account have to sold off then taxes paid then the remaining split. the reason for this is that it is too hard to pick up back these amount of shares. thanks

Hi Lynne,I've been reading through your posts, and they are very clear and in understandable terms! Because of this, I have a couple of questions that are probably very basic, but I wish to clarify for myself. I had a relative pass away recently, and left his estate to 6 cousins and the executor (split equally 7 ways.) I am one of the beneficiaries. Are all the funds kept and dealt with in the estate until all debts and expenses are paid, and then distributed to beneficiaries? Or, does the executor have the ability to take out money at their discretion to use or distribute as they see fit? And, how much visibility to the whole process (ie wills, accounts, documents, selling of properties, etc.) is a beneficiary entitled to? I just want to ensure that everything is split fairly, and that no one receives any extra benefits. Thanks so much!

Hi there - I'm dating a new person who has recently noted to me several tax issues: -His father died in June 2012 of Cancer and had the assets transferred to his name prior to death except for 1 (house) which is going through probate -His father and mother have not filed taxes for personal and the business they had which was a sole propropertorship for many many I'm worried about the consequences to my boyfriend and me as we start our new life together but he continues to not file his mothers taxes None of the assets were in her name but she does participate in the business and is not considered to be an employee of the business Please advise.

If your boyfriend is the executor of his father's estate, he is legally responsible for filing all of the unfiled tax returns for his father and for his father's business. If he transfers the assets of his father's estate to himself or to his mother, or to anyone else for that matter, while taxes remain unpaid, he will become personally responsible for their payment out of his own pocket.

While his mother is alive, she is responsible for filing her own taxes, unless of course your boyfriend is acting under her power of attorney.

Not filing back taxes when you're legally in charge of someone else's affairs, either as an executor or power of attorney, is just sticking your head in the sand. It'll come back around, believe me.

My friend recently became a widow. She was aware that he had ever legally done anything on paper with regards to separation / divorce. She is aware that unless he cared for her in his will, that his first wife collects everything, as most things were in his and her names as that is how they were purchased years ago. He did however have a large company that is only in his name. My friend cared for this man for a few years while he was ill. Can she sue his estate for this care.

You're right that assets that were jointly held with another person - former wife or not - will go to that person by right of survivorship. It's very sad that people can leave their loved ones in such terrible positions simply by refusing to make a will to look after them.

If he had partners or other shareholders in this company, your friend should try to find out whether there was a shareholder's agreement in place that might state what is to happen to his shares.

Obviously since the man didn't divorce his first wife, your friend must have been a common law spouse. Depending on which province your friend lives in, she may be able to make a claim on his estate as a dependent. In Alberta, for example, her claim would actually trump that of the former wife. This is worth talking over with a local wills and estates lawyer.

It may be possible to make a claim against the estate for the care she provided. It's unlikely that the claim would succeed under the law of contract, since there is likely no agreement on his part to pay her for her care, but there could be a claim under unjust enrichment.

I would like to see your friend talk to an experienced estate lawyer in her province, as she may be able to improve her position.

Hi Lynne. If I claim to be a non resident in Canada and rent out my primary residence after I left, can I pass my rental income to my adult child? If I can, how? She's a student. I do not own any property anywhere outside of Canada.

I am a Canadian, and a US residence. My parents want to add my name to their property title. When they passed away, I will inherited the property. Do I have to pay any tax in Canada because of non Canadian resident?

depends on the province if you are the only dependent and are deemed executor then the govt deems you as a foreign executor which opens up a whole other kettle of fish. first since you are a foreign executor the estate becomes listed as a foreign estate and as executor you have to place a bond worth twice the estate and get two persons who reside in the province to put up property as collateral for the bond...then as I understand it once that is done and the will is probated the govt will take their share of the foreign estate up to 47% if you are the sole executor you can give up that right to a close in province relative or assign a trustee to stop this from occurring...still I am not sure as to the legalities or outcome of being a beneficiary of a Canadian will in the united states. if you are treated as a foreign beneficiary and if you will be taxed as such.

Have learnt a lot from your comprehensive answers to the questions above...thank you! One question from me. My father has 2 quarter section farms; one of them has his home on it. He has left the quarter section with the farm on it to his son who co-farms and resides with him and the other quarter section to be shared between his three daughters. Both quarter sections are located "together"..with a road separating the properties. Are both quarter sections considered principal residences and therefore not eligible for capital gains, or will the 2nd quarter section (without the house) have to pay capital gain taxes?

The principal residence exemption to capital gains tax is not going to extend to two quarter sections. There is a limit on how many acres may be considered the principal residence.

Has your father looked into the exemptions available for farms? This might be a better option for him. An operating farm that is being handed down from one generation to the next, as long as that next generation is farming too, can be rolled on a tax-deferred basis. This is simply called a farm rollover, and is specifically designed to allow family farms to continue to operate without losing chunks of land or money to capital gains tax.

Perhaps your father should sit down with an accountant or an estate planning lawyer to find out more about the farm rollover.

I assume that this type of business is incorporated and that you own the shares. That being the case, the shares of the company are subject to capital gains tax when you pass away or sell them. I also assume that you intend for your estate to go to your wife, since your question was whether they would be taxable to her. No, the tax is not for your wife to pay, it's for your estate to pay.

At this point, for many married couples, it's really the same thing since almost everything is either jointly held between them, or they are each other's named beneficiaries (such as on RRSPs). If this is the case, you need to figure out how your estate is going to pay the taxes on the company shares.

One solution is to make a will in which you direct your executor to roll the shares over to your wife on a tax-deferred basis. This would mean that no tax is payable at the time the shares go from you to your spouse. This really only makes sense if she is going to carry on the business. Otherwise she is going to own a company that she is going to have to sell herself, and pay the tax herself.

Another option is to ensure that there will be assets in the estate to pay the tax. Lots of business owners have life insurance on themselves for this very reason.

If you can't get life insurance or you don't want to, you can take a look at what else you might have in the estate that would be available to pay taxes, such as non-registered investments.

This is something that you might want to sit down and discuss with an estate planning lawyer or accountant.

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No blog post or online article could ever take the place of a one-on-one discussion with an experienced professional advisor. Even when responding to a reader question, the answers on this blog are intended as general information only. Don't rely on general information as if it were legal advice. Use what you read here as a starting point for your research or enquiries.